If you were a poor person in a poor country, would you choose to work in a sweatshop, or be your own boss, buying and selling in the local market? Which would you value more- security and stability, or variability with the potential for income growth? And should we really be pressing for more sweatshops in poor countries, as many economists- from Krugman to Sachs, seem to advocate of late?
If you haven't listened to this week's EconTalk episode, I hope you do, as I think you'll find it challenging. Host Russ Roberts, as filled with humility as any economist I know, says, "I don't know how to solve all the problems of the world at one time, but when I see people desperately trying to do something, I assume they are trying to better themselves, and probably know more about their situation than I do." So when 300 people line up to vie for 50 jobs in a factory (or WalMart), their revealed preferences suggest that these jobs beat the alternatives. Right??? Chris Blattman of the University of Chicago returns this week, and challenged a lot of my thinking (and his own, he tells Russ) about just how good an alternative employment in a sweatshop is for people in developing countries.
Blattman and Stefan Dercon conducted a fascinating experiment in Ethiopia, trying to tease out the trade-offs people make in their employment choices. Blattman admits he assumed that stability would be prized over the risk inherent in entrepreneurship, but the results they got surprised him. See if they surprise you, too, and let us know your thoughts. We love to hear from you!